EDMONTON – Frustrated city councillors shut down arena talks with Oilers owner Daryl Katz Wednesday and are considering options that include building the project alone.

“It seems (the Katz Group) want to keep all the costs, but the city absorbs them. That’s not fair,” Mayor Stephen Mandel said.

“It’s wrong to hold us up for ransom.”

There has been nothing to justify Katz’s demand for a $6-million annual subsidy to offset operating costs at a downtown arena, which city staff identified as the major stumbling block to completing a deal, Mandel said.

“The deal we offer to Mr. Katz was incredibly profitable,” he told reporters. “I know the numbers and I can tell you he wasn’t going to lose money.”

Mandel supported a unanimous motion to immediately cease negotiations over jointly building what is now a $475-million facility and look at other ideas, including refurbishing Rexall Place or having the city put up a new arena by itself.

“I don’t know what we do. We have been negotiating and our administration has been working incredibly hard for years, and I don’t believe we’re much further ahead than we were four years ago.”

However, Mandel cautioned that even if the city constructed an arena, it would still have to negotiate a lease with the Oilers.

The final straw for many councillors was Katz’s refusal to attend the meeting to lay out his justification for extra money.

He argued Tuesday in a public letter that after a tentative agreement was reached last October on how to fund and operate the arena, his team did further studies and determined the costs would be higher than expected and the revenue lower. Without a deal, Mandel couldn’t say whether the Oilers will stay in Edmonton, where their lease at Rexall Place expires in 2014.

Instead, he alluded to the Seattle visit Katz and other Oilers executives made last month, when that city approved its own arena project. The trip was seen by many as a threat to move the team, and drew so much public anger that Katz later apologized.

The mayor urged Oilers supporters to get involved in the issue and pressure the team to explain its position.

“The hockey fans, they need to call up the Katz Group and the Oilers, to ask them why they need the money … Just to say it isn’t an answer.”

There are still 15 outstanding issues to resolve before a final deal can be reached, said city manager Simon Farbrother.

While 12 can probably be resolved, the operating subsidy, a proposal to have the city become the anchor tenant in a new Katz office tower, and how to divide $50 million in extra costs are critical issues, he said.

The city has already spent about $15 million on design and $76 million for land, although the value of the property has gone up, he said.

Farbrother wasn’t optimistic that intervention by NHL commissioner Gary Bettman, who helped the two sides reach the tentative agreement at his New York office last fall, would be effective this time.

“Unless there’s a shift in the philosophy of either council or the Katz Group, I’m not sure a mediator is going to make much difference.”

The agreement reached last fall called for a $450-million arena to be built downtown beside 104th Avenue, in an area expected to have billions of dollars worth of development in a surrounding entertainment district.

Katz would make yearly $5.7-million payments to cover $100 million of the construction cost plus interest, a ticket tax would pay $125 million and the city would contribute $125 million from taxes on future construction and other sources.

The remaining $100 million was expected from the provincial government, although it hasn’t been committed.

Katz would keep all the revenues from the building and pay all operating, repairs and maintenance costs.

But councillors insisted he will have to change his tune if an agreement is ever going to be completed.